The Use of the Word "Competition" in the Name of the Market

question 26

Multiple Choice

The use of the word "competition" in the name of the market structure called "monopolistic competition" refers to the fact that

• A) there are many sellers in a monopolistically competitive market, and there is free entry and exit in the market just like a competitive market.
• B) monopolistically competitive firms face a downward sloping demand curve, just like competitive firms.
• C) monopolistically competitive firms charge prices equal to the minimum of their average total cost, just like competitive firms.
• D) the products are differentiated in a monopolistically competitive market, just like in a competitive market.

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Definitions:

Coincidence of Wants

A situation in a barter system where two parties each have a good or service that the other desires, allowing for a direct trade.

Division of Labor

The assignment of different parts of a manufacturing process or task to different individuals in order to improve efficiency and productivity.

Specialization

The process of focusing on a narrow area of expertise or production to increase efficiency and output.

Individual Level

Refers to analysis or effects observed at the level of individual agents, such as persons or firms, within a larger system.